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This study investigates the effect of market competition and development indicators on bank risk-taking behavior, capital regulation, and efficiency of banks in Asian emerging economies in light of their recent financial liberalization. Using stochastic frontier analysis (SFA) for measuring cost and profit inefficiency and regressed simultaneous equations by following the approach of generalized methods of the moment (GMM) the study covers a sample of 191 banks for the period between 2000 and 2014 in three Asian emerging economies such as Bangladesh, China, and India. The robust empirical results of GMM panel estimator reveal three core findings: first, intense competition of Asian banks has a positive association with risk-taking but has a negative correlation with regulatory capital and inefficiency. Second, it provides evidence that in economic progression, sample banks having a strong tendency of taking the risk. But no significant relationship found between GDP growth and capital, and GDP growth and inefficiency. This paper thus provides compelling insights to the policy makers and bank managers in setting appropriate strategy for a financial institution in the region.

This study empirically investigates the quadratic effects of bank diversification, size and global financial crisis on risk-taking behaviour and performance. To unfold those effects, it uses the generalized method of moments (GMM) estimator and also uses an unbalanced panel data set on a large sample consisting of 542 bank-year observations between 2004 and 2015. The key results for emerging economies are as follows: (a) increasingly higher non-performing loan ratio makes the bank underperforming and unstable; (b) benefits derived from bank diversification are heterogeneous and confirms portfolio diversification theory; (c) small-sized banks of Bangladesh ensure higher advantage from portfolio mix over large banks; (d) large banks of South Africa achieve higher benefit from income diversification over small-sized banks; and finally, this study evidences that during the financial crisis, emerging economies can use portfolio diversification as a mechanism for controlling risk and improve bank performance. Mainly, emerging countries can rely on income diversification and should involve this mechanism with systematic risk a great care of.

Article History JEL Classification:C2, G17, D22, G28, F20.As a striking force and operational optimization, human capital and cost efficiency of commercial banks are worth considering factors in decision making. Using simultaneous equation models this study delves the interrelationship between bank risk, capital and efficiency of a sample developing country-Bangladesh incorporating new dimension human capital efficiency along with existing cost efficiency through Stochastic Frontier Analysis (SFA). The empirical results of generalized methods of moments estimator (GMM estimator) from 2000-2015 show that capitalized commercial banks are more capable of absorbing risk and enhancing human capital efficiency. Increasing amount of risk leads banks to improve their level of capital but that reduces the cost efficiency of banks. We also find the significant impact of risk and capital on the efficiency of banks. With the increase of capital and risk, the human capital of banks behaves more efficiently whereas the efficiency of cost reduces substantially. Although no significant relationship observed between risk and human capital efficiency in risk equation, the inefficiency of cost find inversely associated with risk and positively associated with capital in risk and capital equations respectively. Contribution/ Originality: This study originates new estimation of technical efficiency named Human capital efficiency along with existing cost efficiency using Stochastic Frontier Analysis to examine the simultaneous relationship between risk, capital, and efficiency of a sample Asian country Bangladesh.